Inequality in the Arab region:
A ticking time bomb
Foreword
The Arab region continues to be one of the most unequal regions worldwide. As poverty rises, the growing wealth gap between individuals fuels increasing inequality. The region exhibits persistent and increasing levels of inequality in opportunity, especially among certain groups and in certain areas. For example, youth unemployment, which is 3.8 times higher than that of adult workers, has been the highest in the world for the past 25 years. Unemployment among certain groups, such as women and persons with disabilities, is even higher than that of men and persons without disabilities. Gender-based inequalities stubbornly remain above global levels. Wealth creation opportunities are declining, with the wealthiest 10 per cent of Arab adults holding 80 per cent of the total regional wealth. Such factors, if left unaddressed, will deepen existing inequalities, hitting the poorest and most vulnerable communities hardest. These factors risk inflaming greater disaffection and alienation among Arab populations, resulting in a breakdown of social cohesion. Furthermore, social, political and economic inequalities have amplified the impact of the COVID-19 pandemic, which disproportionately affected young people in the Arab region. The pandemic highlighted the economic inequalities and fragile social safety nets in the region, with vulnerable and at-risk communities bearing the brunt of the pandemic’s repercussions. Despite this bleak picture, Arab populations are optimistic and hopeful. A survey conducted by ESCWA found that 52 per cent of people in the region believe that equality exists, either fully or partially, while 47 per cent believe that equality will increase in the next five years. This optimism must be utilized. To seize this momentum, Arab Governments should not spare an effort to capitalize on youth enthusiasm, which can serve as a strong catalyst for change. This requires going beyond superficial and temporary fixes to fundamentally reform the root causes of inequality, including addressing structural challenges, corruption, governance and institutional deficits, and introducing coordinated economic and social policies. Notably, creating job opportunities was chief among the demands of those surveyed. Decent job creation is necessary to unleash the productive potential of young people, and avoid another “lost generation” with limited access to opportunities as it transitions into the labour market. Arab Governments must recognize that delivering visible impact, securing credibility, and promoting solidarity within the region constitute a successful three-pronged policy approach to reducing inequalities. Practical solutions should be put in place to translate this approach into practice, and ensure that benefits trickle down to those most in need. To kickstart this paradigm shift in policy reform, I propose establishing a solidarity fund and a regional coalition to reconnect different population groups across the wealthiest and poorest segments of society, so as to create opportunities to ensure dignified and prosperous lives for the poor and vulnerable, improve shared wellbeing, guarantee growth to build stronger and more stable societies that leave no one behind in the achievement of the SDGs, and promote shared responsibilities, societal solidarity and effective partnerships for development. We need to act now. Our children will never forgive us if the legacy they inherit is fragmented, fragile and marginalized societies.
Rola Dashti, Executive Secretary UNESCWA
About the authors
Mehrinaz Elawady
Director, ESCWA Cluster on Gender Justice, Population and Inclusive Development
Introduction
Since the outbreak of the COVID-19 pandemic, the Arab region has witnessed disparities that sharply contradict the vision of equality and inclusion inspired by the Sustainable Development Goals (SDGs). Many poor people in several Arab countries could not procure private medical care and consequently died of the virus, while others survived because they could protect themselves at home or access private health care. Around 8.8 million people became newly unemployed during the pandemic in the Arab region, while the wealthiest 10 per cent of the region’s population now control 81 per cent of its net wealth compared with 75 per cent prior to the pandemic. In 2023, an additional 10.9 million poor people in the region will fall into extreme poverty, 8.5 million owing to the impact of the pandemic and 2.4 million as a result of the war in Ukraine.
The present report builds on the increasing awareness among Governments and people of the importance of tackling inequality as a prerequisite for a just and peaceful society. It complements the Pathfinders flagship global report entitled From Rhetoric to Action: Delivering Equality and Inclusion.
“Inequality and exclusion are not destiny – change is possible.”
Pathfinders, From Rhetoric to Action – Delivering Equality and Inclusion, 2021.
- People globally are demanding a new social contract to heal a divided world. Opinion surveys show an immense preoccupation with societal divisions and a consensus that more needs to be done to address them.
- Nationally, countries that have sustained progress in tackling inequality have adopted the following three-pronged approach:
- ⮚ Delivering visible results that make a difference in people’s daily lives, in areas such as social protection, housing and wages.
- ⮚ Building solidarity through truth-telling exercises and strong community-based programmes.
- ⮚ Securing credibility and avoiding setbacks by fighting corruption and widening political power.
- International policies are a critical complement to national action. The three urgent priorities now are vaccine equity, access to finance, and tax norms and agreements incentivizing those who have most profited from growth to contribute to the COVID-19 recovery and to climate change.
- It lays out key statistics explaining how reducing inequality and exclusion is in everyone’s interest, through more stable growth, pandemic containment, the ability to address the climate crisis, and political stability.
- It looks at the “how to” of practical policymaking, starting with political and practical viability. It describes a menu of 21 policy areas that can be adapted to country circumstances, rooted in polling, research, and government and civil society consultations.
- It combines attention to both income and identity-based inequalities, including gender, race and ethnicity.
- It links the economic and social aspects of inequality to its civil and political aspects, including the links between State capture and inequality, and the benefits of maintaining civic space.
- It is explicit about the relationship between national and international policies in combating inequality and exclusion.
The present report also tackles the long-standing challenge of youth unemployment in the Arab region, which is one of the most enduring forms of inequality. Enhancing the status of young people and assimilating them into the labour market is crucial to reducing inequality, since young people (aged 15-29) represent about 30 per cent of the entire Arab population.
1. The Arab region: the most unequal region worldwide
Key messages
The Arab region is the most unequal region worldwide. In 2020, 58 per cent of national income was accrued by the top 10 per cent, and only 8 per cent was accumulated by the bottom 50 per cent.
Poverty is intergenerational: once a family falls into poverty, it is likely to remain there for a few generations.
Gender inequality in the Arab region has been systematically above the global average, with an estimated 179 years needed to close the gender gap compared with 142 years globally.
Conflict is an impediment to reducing inequality: the direct cost of conflict incurred by Iraq, Libya, the Syrian Arab Republic and Yemen, and the indirect spillover effects on neighbouring countries, were estimated at $752 billion between 2011 and 2015.
Economic growth alone will not solve this problem. On the contrary, non-inclusive growth could exacerbate inequalities without strengthening economic participation for all.
“Justice is the foundation of government. Injustice is a prelude to destruction.”
Ibn Khaldun
A. Protracted conflict and instability
The political instability that swept through the Arab region in the early 2010s was a direct result of extreme inequality. Although each country had its unique experiences and citizen demands, the popular uprisings all aspired to justice, equality and better living standards. The Arab region is caught in a vicious circle of conflict, with devastating effects on its ability to consolidate development gains. The root causes and drivers of conflict in the region, combined with their immediate and long-term impact, are likely to perpetuate further conflict and exacerbate inequality. The breakdown of economic organizations and business networks, the degradation of State institutions, and the fragmentation of society will take generations to remedy, should conflict cease today. Figure 1 shows the cyclical impact of conflict.
Figure 1. Cyclical instability and conflict
B. Snapshot on inequality in the Arab region
The Arab region is the most unequal region worldwide. Inequality is a dynamic phenomenon that is constantly changing and interacting with social, economic and cultural factors operating at all levels across the region. Inequality negatively affects progress towards the SDGs and poverty reduction through inefficient resource allocation, wasted productive potential, a high dependency ratio, and impaired institutional development. The present section provides an overview of some of the inequalities that are evident in the Arab region.
1. Wealth concentration and inequality
At the end of 2019, when the COVID-19 pandemic started, average wealth in all the Arab subregions had begun increasing owing to rising valuations in the commodities and securities markets. By the end of 2020, however, Arab nationals’ wealth had declined, notably in the GCC subregion. While mean wealth dipped by 8 per cent in Arab low-income and conflict-affected countries, it declined by 13 per cent in GCC countries compared with an average fall of 10 per cent regionwide (figure 2).
Figure 2. Average personal wealth, December 2000 – December 2020
2. Income poverty
The Arab region is the only region worldwide with increasing poverty rates in the 2010s. The comparative performance of the Arab region has been declining significantly. For example, in 2010, the Arab region had roughly the same poverty rate as Latin America (6.9 per cent and 6 per cent, respectively). However, by 2019, the Arab region had triple the poverty rate. The problem of rising income poverty has been particularly severe in Arab conflict-affected countries (figure 3).
Figure 3. Extreme poverty trends, 2000-2019
3. Income inequality
The Arab region has registered some of the highest levels of income inequality globally (figure 4). In some countries, the top 10 per cent of earners account for more than 60 per cent of national income, compared with 52 per cent globally, 55 per cent in Latin America, and 36 per cent in Europe.
Figure 4. Income inequality in the Arab region
4. Gender inequality
The Arab region needs around 179 years to close its gender gap, which was one of the highest gender gaps worldwide in 2021 at 61 per cent compared with 67.7 per cent globally.
The Arab region has been the lowest performing group worldwide in the “economic participation and opportunity” subindex of the Global Gender Gap Index, which has affected its performance in the entire Index. Over the period 2006-2021, the region managed to close an average of 40.7 per cent of the gap in this subindex, which is relatively low compared with the global average of 58 per cent.
Figure 5. Economic participation and opportunity subindex in the Arab region, 2006-2021
2. COVID-19: from bad to worse
Key messages
The COVID-19 pandemic has highlighted deep and longstanding inequalities across the Arab region.
Although the region was already significantly unequal, the pandemic deepened and accelerated those inequalities, hitting the poorest and most vulnerable communities hardest.
The pandemic pushed an additional 16 million people into poverty, increasing the number of poor in the region to over 116 million, almost a quarter of the population.
People in the informal sector, vulnerable workers, women, young people, less-educated workers and persons with disabilities suffered the most from job losses during the pandemic.
Temporary informal sector labour accounted for the greatest proportion of net job losses in the Arab region in 2020. At the same time, workers with permanent jobs in tele-workable occupations were largely spared from unemployment, thus widening existing inequalities between those in the formal and the informal sectors.
“You need some inequality to grow…but extreme inequality can be harmful to growth.”
Thomas Piketty
Pandemic of inequality in the Arab region
The Arab region was already significantly unequal, but the pandemic deepened and accelerated these inequalities. At the same time, existing social, political and economic inequalities amplified the impact of the pandemic. The outbreak of COVID-19 caused drastic changes in jobs, education, economy, welfare systems and social life in the region, hitting the poorest and most vulnerable communities hardest. It also revealed the fragile safety nets that left vulnerable individuals, families and communities bearing the brunt of the crisis.
Globally, the wealth of the world’s 10 richest men has doubled since the pandemic began, but the income of 99 per cent of people has dropped because of the COVID-19 pandemic. Widening economic, gender and racial inequalities, in addition to inequalities between countries, are tearing the world apart. This is not by chance, but by choice: “economic violence” is perpetrated when structural policy choices are made for the benefit of the richest and most powerful individuals. This causes direct harm to everyone else, especially the poorest groups, women and girls, older persons, and persons with disabilities. Inequality contributes to the death of at least one person every four seconds. However, economies can be radically redesigned to be centred on equality.
In the Arab region, micro, small and medium enterprises (MSMEs) in the informal economy were particularly vulnerable to the economic impact of the virus. Consumers were demanding and spending less, leading to decreasing revenues, liquidity problems, reduced output, and layoffs. Arab countries showed characteristics that made them more susceptible to deeper economic and social challenges compared with other countries, including dependency on the informal sector for economic activity and employment, lower shares of tele-workable jobs, and higher numbers of informal sector workers. Reducing informality will help reduce inequalities in the long run through stronger social welfare safety nets, better enforcement of laws and policies, increased revenue yields, easily administered regulations, and enhanced economic growth.
“Despite the additional challenges that the COVID-19 pandemic brought to the region, it provides new opportunities for recovering forward better, and enabling a transformation in the modes of governance and in development operation and implementation. This required transformation is one premised on shared responsibility and societal solidarity that promotes responsible and effective partnerships for development, and strengthens social and economic solidarity, leaving no one behind in the pursuit of the SDGs.”
Rola Dashti, Executive Secretary of ESCWA
Social protection in Arab countries before
COVID-19
Social protection coverage differs among men and women in the region, despite the positive change witnessed recently. For example, the gender distribution of old-age pensioners covered by social insurance schemes has been systematically low for women when compared with men. According to available data in four Arab countries, old women covered by pensions ranged between 14 per cent in Tunisia, 17 per cent in Jordan, 37 per cent in Kuwait, and 25 per cent in Bahrain, compared with 86, 83, 63 and 75 per cent, respectively, for men. This is largely a consequence of women’s absence from the workforce in the preceding decades (figure 6).
Figure 6. Total expenditure on social protection (Excluding health), 2020 or latest available year (Percentage of GDP)
Figure 7. Gender distribution of social assistance beneficiaries
Social protection in Arab countries during
COVID-19
To tackle the pandemic, Arab Governments had to swiftly change gear to ensure fiscal support for those without any form of social protection. Within the first six months of the pandemic, 189 new social protection measures were introduced. By September 2021, the total fiscal response to the COVID-19 crisis in the Arab region was $94.8 billion, which was equivalent to approximately 2 per cent of the region’s GDP in 2020. This is considerably low compared with the global average fiscal response to the pandemic, which was 22 per cent of GDP. However, of this $94.8 billion total fiscal response in the Arab region, an impressive 18 per cent was allocated to various forms of social protection programmes, such as cash transfers. In relative terms, this is double the global average of social protection spending as a share of the total fiscal response, which is estimated to be just 9 per cent.
3. Challenges posed by inequality
Key messages
The factors driving inequality in the Arab region include demographic dynamics, poor education, digital divides, weak institutions, corruption and lack of transparency, data deficits, and unaffordable housing.
Around 51 million people in the Arab region are suffering from undernourishment, with an alarming increase in the "triple burden of malnutrition" consisting of undernutrition, overweight and obesity, and many suffering from micronutrient deficiencies.
Spatial disparities are wide in the region, with 75 per cent of those living in extreme poverty residing in rural areas.
High inequality of opportunities in education is determined by family circumstances, including parental income, educational attainment, and community characteristics.
Access to education is affected by low fixed-broadband penetration, which stands at 8.8 per cent, compared with a world average of 12.1 per cent.
“The true measure of any society can be found in how it treats its most vulnerable members.”
Mahatma Gandhi
Regional drivers of inequality
Demographic dynamics
The region’s population has more than tripled since 1970, expanding from 123.5 million to 398.5 million in 2015. The region’s population is expected to grow further to 520.8 million by 2030, and to 676.3 million by 2050. Since the majority of those covered by pensions in the region are men, this will exacerbate gender inequality. Unprecedented flows of international migration to the Arab region are also changing population structures.Poor education
Inequality in education attainment (number of years of schooling) remains higher in the Arab region than in any other region globally, and varies significantly between rich and poor Arab countries. Furthermore, the pandemic severely disrupted education in the region. The majority of learning institutions were closed for several months, affecting the education of more than 110 million students. Inequality of opportunity in accessing education is also determined by gender and geographical distributions. Arab girls are three times more likely to be out of schools than boys.Digital divide
During the pandemic lockdowns, most Arab countries pursued digital solutions, including virtual schooling, online conferences, remote work, e-commerce, online public services and telemedicine. However, these initiatives widened inequality owing to many people’s limited access to affordable Internet. Resorting to these digital solutions was further hampered by low fixed-broadband penetration, which is 8.8 per cent in the region compared with the world’s average of 12.1 per cent.-
Weak institutions
Reducing inequalities requires reasserting the role of the State as the fundamental guarantor of equal economic and social rights, and implementing economic and social policies to equitably redistribute resources. Public investments towards universal provision of quality education and basic health, in particular, contribute to the reduction of poverty and inequality. Corruption and transparency
The Arab region is struggling to combat corruption, with an average score of 32 out of 100 in the 2021 Corruption Perceptions Index, which ranks countries by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys.Data deficits
The Arab region lacks reliable data on inequality. Economic growth numbers are published annually by Arab Governments, but they do not indicate how growth is distributed across the population: who gains and who loses from existing economic and social policies. Providing such data is critical for public policy formulation.
Figure 8. Corruption Perception Index in Arab countries, 2021
4. Listening to people’s concerns
Key messages
People in the Arab region are optimistic about the future of social and economic equality in their countries.
Around 60 per cent of people in Kuwait and 55 per cent Oman think that current levels of social and economic equality are high; and 55 per cent and 50 per cent, respectively, think social and economic equality levels will be high in five years. In contrast, only 2 per cent of people in Lebanon think that social and economic equality currently exist, and 6 per cent think there will be more social and economic equality in five years.
Job opportunities for young people are the preferred option to improve social and economic equality in Egypt, Iraq, Jordan, Kuwait, Mauritania, Morocco, Oman, the Sudan and Tunisia.
Unlike other countries, Lebanese people think that the best way to reduce social and economic inequality is by combatting corruption.
In people’s opinion, top government actions to improve employment opportunities in the region are the creation of more jobs in the private sector, and the provision of more funding for micro and small enterprises.
“There is no greater wealth than wisdom, no greater poverty than ignorance, no greater heritage than culture and no greater support than consultation.”
Ali Ibn Abi Talib
Results of the public opinion survey on social and economic equality
1. People’s perceptions of current social and economic equality in the Arab region
At the national level, Lebanese respondents were the least optimistic when rating social equality in their country, with 67 per cent saying that there was full inequality. Iraqi respondents were the second least optimistic, with 49 per cent saying that there was full inequality in their country. In contrast, people in Kuwait were the most optimistic, with 60 per cent saying that there was full equality in their country. Omani respondents were the second most optimistic, with 55 per cent saying that there was full equality in their country (table 1).
Table 1. Current perceptions of social and economic equality at the national level
2. Arab people’s perceptions of social and economic equality in the next five years
At the regional level, 47 per cent of respondents said that there would be more social and economic equality in the region in the next five years: 26 per cent felt that there would be a lot more equality, and 21 per cent felt that there would be some more equality. Around 19 per cent of those polled felt that there would be the same level of social and economic equality in the next five years, and 27 per cent said that there would be less or a lot less equality.
At the national level, Kuwaiti respondents were again the most optimistic with regard to social and economic equality in the next five years, with 55 per cent expecting that there would be a lot more social and economic equality. Omani respondents were the second most optimistic, with 50 per cent expecting a lot more social and economic equality. In contrast, Lebanese respondents were again the most pessimistic, with only 6 per cent expecting a lot more social and economic equality in the next five years. Iraqi respondents were the second most pessimistic, with 17 per cent expecting a lot more social and economic equality (table 2).
Table 2. Perceptions of social and economic equality at the national level in the next five years
3. People’s perceptions of what Arab Governments should do to enhance employment opportunities
- Create more jobs in the private sector
- Provide more funding for small and micro enterprises
- Reform the education system to meet market demands
- Reform laws that govern the establishment of private businesses
- Engage more women in the labour market
- Reform the taxation system
Respondents were presented with the following options:
- Create more jobs in the private sector (47 per cent)
- Provide more funding for small and micro enterprises (46 per cent)
- Reform the education system to meet market demands (39 per cent)
- Reform laws that govern the establishment of private businesses (23 per cent)
- Engage more women in the labour market (22 per cent)
The following five policy priorities to enhance employment opportunities received the most support among respondents across the 10 countries:
Perspectives by country
1. Egypt
In Egypt, respondents had an optimistic perspective, with 28 per cent saying that they currently had full equality, and 39 per cent felt that they had some equality. Regarding equality in the next five years, 29 per cent were expecting a lot more equality, and 28 per cent were expecting some more equality.
2. Iraq
Iraqi respondents had a pessimistic perspective, with only 6 per cent saying that they currently had full equality, and 24 per cent saying that they had some equality. Regarding perceptions of equality in the next five years, 17 per cent were expecting a lot more equality, and 14 per cent were expecting some more equality.
3. Jordan
In Jordan, 16 per cent of respondents felt that they currently had full equality, and 46 per cent felt that they had some equality. Regarding perceptions of equality in the next five years, 20 per cent were expecting a lot more equality, and 15 per cent were expecting some more equality.
4. Kuwait
Kuwait respondents had an optimistic perspective, with 60 per cent saying that they currently had full equality, and 18 per cent feeling that they had some equality. Regarding perceptions of equality in the next five years, 55 per cent were expecting a lot more equality, and 12 per cent were expecting some more equality.
5. Lebanon
Lebanese respondents had an extremely pessimistic perspective, with only 2 per cent saying that they currently had full equality, and 13 per cent feeling that they had some equality. Regarding perceptions of equality in the next five years, 6 per cent were expecting a lot more equality, and 19 per cent were expecting some more equality.
6. Mauritania
In Mauritania, 17 per cent of respondents felt that they currently had full equality, and 36 per cent felt that they had some equality. Regarding perceptions of equality in the next five years, 20 per cent were expecting a lot more equality, and 28 per cent were expecting some more equality.
7. Morocco
In Morocco, 14 per cent of respondents felt that they currently had full equality, and 40 per cent felt that they had some equality. Regarding perceptions of equality in the next five years, 23 per cent were expecting a lot more equality, and 29 per cent were expecting some more equality.
8. Oman
In Oman, 55 per cent of respondents said that they currently had full equality, and 32 per cent felt that they had some equality. Regarding perceptions of equality in the next five years, 50 per cent were expecting a lot more equality, and 15 per cent were expecting some more equality.
9. Sudan
In the Sudan, 14 per cent of respondents said that they currently had full equality, and 29 per cent felt that they had some equality. Regarding perceptions of equality in the next five years, 18 per cent were expecting a lot more equality, and 19 per cent were expecting some more equality.
10. Tunisia
In Tunisia, 4 per cent of respondents said that they currently had full equality, and 20 per cent felt that they had some equality. Regarding perceptions of equality in the next five years, 18 per cent were expecting a lot more equality, and 28 per cent were expecting some more equality.
5. Young people unutilized resources
Key messages
Youth unemployment in the Arab region has been the highest worldwide for the past 25 years. It is 3.8 times higher than of adult workers.
Youth unemployment in the region is 26 per cent compared with a global average of 12.8 per cent.
About 85 per cent of working young people in the region are in the informal sector.
The number of unemployed persons in the region is expected to rise from 14.3 million in 2019 to 17.2 million in 2030, even without taking into account the impact of the COVID-19 pandemic and the substitution effect of automation.
Inequality in employment is seen across generations. Persistent youth unemployment in the region indicates that young people face unique barriers over and above those faced by other workers.
“The future promise of any nation can be directly measured by the present prospects of its youth.”
John F. Kennedy
Overview of youth unemployment
Youth unemployment (people aged 15-24) is the most significant socioeconomic challenge facing the Arab region. Youth unemployment in the region has been the highest worldwide for the past 25 years, estimated at 26 per cent compared with a global average of 12.8 per cent. Youth unemployment in the region is 3.8 times higher than total unemployment. Moreover, an estimated 85 per cent of working young people are in the informal sector. The Arab region is also characterized by the largest gender gaps in labour force participation and employment worldwide. Within the 15-24 age group, the female labour force is 80 per cent smaller than its male counterpart.
56 per cent of people in the Arab region (54 per cent males and 58 per cent females) believe that creating job opportunities for young people is the most important policy to reduce social and economic inequality in the Arab region.
ESCWA survey
Gender dimension of youth unemployment
Inequality in female youth unemployment is evident between Arab countries and within them. On average, women are 2.6 times more likely to be unemployed than men. Female youth unemployment in the region, which is the highest worldwide, stands at 40 per cent.
The pandemic accentuated unemployment among women. Women’s jobs were particularly hard hit, as they are more likely to work in the informal economy and service sectors that were most affected by the lockdowns.
Average youth unemployment in Arab countries by sex, latest available year
Barriers to youth employment in the Arab region
Inequality in employment is witnessed across generations in the region. The youth unemployment rate in the Arab region is 3.8 times higher than that of adult workers, highlighting that young people face unique barriers over and above those faced by other workers.
1. Poor quality education
While school and university enrolment rates have increased, the quality of education has deteriorated significantly, resulting in high unemployment rates among young, new college graduates. This unique phenomenon among those with high levels of educational attainments is representative of the region. Training systems and curriculums are not in line with the needs of the labour market, leading to a significant skill mismatch.
“Research has shown that quality higher education – particularly with a focus on soft skills and internships – boosts the potential of graduates to secure their first jobs after graduation. It is the first job after graduation that is the essential first step to moving forward. You don’t have to see the whole staircase, just take the first step.”
Martin Luther King Jr.
2. Poor economic performance and job creation
A distinguishing feature of the Arab region’s weak economic performance is high unemployment rates and a persistent lack of success in creating enough jobs for young people. High youth unemployment rates are largely due to a lack of job opportunities, but also to barriers to entering the labour market. The low availability of high-skilled jobs and the low value placed on skills gained through vocational training are also significant factors.
There are five broad reasons why the formal private sector in the Arab region is not creating enough decent and inclusive jobs. Understanding the following reasons is central to creating practical solutions to reduce unemployment:
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Low-productivity economies with wide deficits in youth participation and gender equality, a large informal sector, and a limited role of the formal private sector, particularly in employment creation.
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Despite relatively high GDP growth rates in recent years prior to the pandemic, opportunities for aggregate productive and decent employment fell short. Jobs were mainly created in informal low value-added production and the public sector, which also added to political polarization. Consequently, aggregate labour productivity and real wages stagnated or dropped in real terms.
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The low inclusivity of women in the labour market. The main difference between the employment profile of the region and the rest of the world is an extremely low women’s labour force participation rate, which is caused by weak job creation in Arab economies, structural constraints, attitudinal barriers, and gender dynamics that discriminate against women.
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The challenge facing many Arab countries is not so much a bloated public sector, but rather the failure of public sector policies to achieve successful economic structural transformation and diversification. This failure pressures many Governments, especially in oil-rich economies, to create inclusive public employment opportunities, resulting in limited jobs in the formal private sector.
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Conflicts in several Arab countries have damaged the region’s attraction to foreign investment, thus undermining prospects for sustainable development.
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GDP growth rate by region
6. Practical policy solutions
Key messages
A combination of integrated policies is required to reduce inequality.
It is possible to achieve equality that benefits both “the haves” and “the have nots”.
To reduce inequality in employment, it is necessary to follow a three-pronged approach: promoting solidarity, delivering visible impact, and securing credibility and trust.
A solidarity fund should be established to facilitate shared responsibility among the rich and the poor.
A new paradigm shift in government policies and governance is needed to address inequalities in the region, which includes a combination of integrated policies and a financing plan for reducing inequality that takes into account the intersectionality of inequalities.
“Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life.”
Nelson Mandela
A. Three-pronged approach to reducing youth unemployment
The seriousness of the youth unemployment situation in the region requires the urgent application of a multitude of alternative innovative approaches, based on the good practices of other communities, countries and regions.
The present chapter applies the below model to youth unemployment, and proposes practical solutions to help reduce inequality in youth unemployment (figure 22).
Figure 22. Policy approach to tackling inequality and exclusion
B. Practical regional initiatives
Before proposing practical solutions to translate the above policies into action, it is necessary to understand the skills available in the market and the demand for jobs. To facilitate this, ESCWA has developed the Skills Monitor, which comprises big data from online job openings in the Arab region. This is a data-and artificial intelligence-driven tool, built inhouse for the collection, processing and analysis of online job openings in the Arab region.
"A triangular partnership approach is a key transformative policy, including public-affluent-poor (PAP) partnerships and public-business-citizen (PBC) partnerships. PAPs, embodied in mechanisms such as the creation of a societal solidarity fund that targets the poor and creates opportunities for upward mobility and economic benefits, entrepreneurial ventures and innovation, can help assuage growing social tensions between the rich and poor. PBCs, reflected in mechanisms such as shared ownerships in privatized and transformed public economic activities, create economic opportunities for all, and can help in mitigate the growing economic conflict between businesses and citizens."
Rola Dashti, Executive Secretary of ESCWA
The regional coalition should be a catalyst to bring together private sector leaders and organizations to make commitments to reduce inequalities among young people in the job market through creating learning opportunities, training, internships, and mentorship programmes.
Through ESCWA governmental platforms, the coalition will facilitate dialogue between the private sector and Governments, especially ministries of labour and social affairs in the Arab region. It will also facilitate dialogue between young people seeking jobs and the private sector, so as to allow for an intergenerational dialogue on the needs of the job markets, especially the skills needed in the new future of work.
C. Financing options
Key gaps in financing continue to undermine the ability of Governments to create opportunities for young people and reduce unemployment.
At the regional and national levels, the following alternatives can provide pathways to end the pandemic of inequality.
- The Arab Financing for Development Framework, endorsed by ESCWA member States, provides several pathways to finance national sustainable development goals and sectoral development plans. The framework identifies financing channels and an array of financing solutions that can be mobilized from public, private, domestic, international, traditional and innovative sources to bridge the region’s SDG-financing gap, estimated at $6 trillion.
- The ESCWA-proposed solidarity fund provides could create opportunities for vulnerable groups and ensure upward mobility. In addition, the proposed solidarity wealth tax of up to 3.2 per cent on the wealth of the region’s top decile could contribute to closing the poverty gap.
- Redirecting 10 per cent of the newly acquired Arab allocations of SDRs to finance a regional trust could mobilize $3.7 billion for the creation of youth opportunities, especially new jobs. The trust can be further capitalized if G20 countries rechannelled unused allocations to meet the global ambition of directing $100 billion worth of SDRs in voluntary contributions.
- Putting in motion a regional financing equalization vehicle would mobilize additional resources by establishing the much needed Arab social and cohesion fund as one of the instruments (missing elements) of the Arab customs union.
- Reconsidering the results of the 2015 review conducted by the Arab Monetary Fund on the operation of Arab financial institutions, which at the time concluded that existing Arab financial institutions and development agencies had adequately covered the financial needs of Arab countries. Yet, the cumulative aggregate assistance provided by Arab development funds to Arab countries only reached 55 per cent of the total financing provided to other regions.
- Reallocating public spending: reprioritize budget allocations through medium-term expenditure strategies and enhancing public financial management to redirect/generate jobs for young people by eliminating spending inefficiencies. Egypt for example, created the Economic Justice Unit to review its expenditure priorities, and is seeking to optimize its spending by transitioning to SDG-centric budgeting and planning.
- Rationalizing subsidies: Arab countries continue to spend more on energy subsidies than other regions worldwide, and account for a quarter of global energy subsidies. According to IMF, each dollar of government resources removed from energy subsidies and placed towards productive investment translates into two dollars of added growth. The removal of fuel subsidies could raise GDP by 2 percentage points and allow for a 40 per cent increase in social protection spending.
- Recalibrating expenditure priorities: other developing countries, such as Costa Rica and Thailand, opted to shift savings from military spending cuts to finance universal health coverage.
- Rationalizing fiscal incentives: Arab countries tend to provide excessive fiscal incentives and allowances, including deductibles, exemptions, exclusions, accelerated capital depreciation, favourable audit settlements and other credits, to multinational corporations to attract their FDI.
- Raising domestic public resource mobilization capacities: prudent public financial management and effective domestic resource mobilization capacity can be bolstered by enhancing tax progressivity and fairness: shifting broad-based regressive indirect consumption taxes to other forms of direct taxation, including corporate and property taxes, thereby reducing inequality.
D. Government as a catalyst for equality
The Arab region continues to struggle with outdated bureaucratic structures and widespread corruption, which hinder institutional effectiveness and erode accountability. Public institutions play a central role in economic and social development, because they shape the incentives of key economic actors in society, influence investments in physical and human capital and technology, and impact the organization of production. Weak institutions are often the main reason why countries fail.
To reduce inequalities, it is essential to reassert the role of government as the overall guarantor of equal economic and social rights, and implement economic and social policies to equitably redistribute resources.
